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Lean initiatives can be implemented in a series of Plan-Do-Check-Act (PDCA) cycles. In addition to the value stream map metrics, is important to keep a set of metrics to measure progress so that lean and quality objectives are tracked after each cycle. Here is an example of a PDCA outline:

Plan

• Draw current value stream (VS) map in terms of processes (or activities) OR use future map from previous cycle
• Calculate times for current VS map
• Analyze current VS map for waste (delays, additional inspections, extra motions, transport, search time, etc)
• Make a list of relevant, comparable metrics (Cost of non-conformance, delays, search times, inspection times, quality levels, delivery times, customer feedback)
• List opportunities for removing such waste by reducing, re-organizing, realigning, training
• Select easiest opportunities to implement with highest impact first
• Draw future map based on selected opportunities

Do

• Prepare action plan for selected opportunities
• Implement plan by assigning tasks / due dates (no delays)
• After implementation, let the system run and stabilize
• Collect data again for measuring progress

Check

• Analyze data and compare against the “before” set of metrics listed under the Plan phase
• Provide visuals (charts / figures) to show progress / improvement

Act

• Update future value stream (this will become the new “current” value stream)
• List of things you’ve learned from this cycle? Implement in other areas and document for availability and easy access.
• Goals achieved? If yes, What’s next on the opportunities list? If no, What’s the next goal?
• Go the next cycle of PDCA

I’ll use an example in Part II.

Meetings!

In Part 1, I classified waste that can be generated from meetings. At the end of that post, I suggested tracking meetings for a period of time with regard to meeting objective, number of people attending, duration, progress made, etc. After getting such information, we may be able to answer some questions like:

• What objectives or goals were achieved?
• What is the proportion of time spent in meetings to solve ACTUAL quality / customer problems?
• How much time per employee was spent in meetings?

Other questions or metrics may also be established but it is important to have a baseline. Then after improvements are made, metrics can be compared against those baseline figures.

Here are some improvement ideas:

• Restrict meeting duration (e.g. 30 minutes) - and publish start and end times before the meeting. Also start the meeting ON TIME and end ON TIME
• Restrict Agenda - most of the time agenda is too broad and/or goal is not established
• Publish goal / agenda ahead of time so participants are ready. The alternative is that during the meeting someone might say “I’ll look into it” without any time frame. Lack of agenda will lower participants’ expectations of the meeting.
• Restrict participation to those who can add value!
• Assign roles for taking minutes, keeping the team focused on topic, and keeping track of time. These roles may be assigned to one but preferably more participants
• Summarize meeting minutes right after the meeting and share with participants. Don’t forget to include action items, responsibilities, and due dates!

Answer: The Customer!

(1) What does the customer want? >> Use current requirements, marketing surveys, quality function deployment, and other tools

(2) What is the customer getting now? >>  Conduct a detailed assessment, collect complaint data, returns figures, consumer reports, etc.

(3) Identify gaps between (1) and (2) above

(4) Group and prioritize gaps. Use Pareto analysis, if needed.

(5) Start PDCA’s (cycles of plan-do-check-act) to identify root causes and implement solutions for each or a group of prioritized issues.

(5) Re-do Pareto Analysis and go to the next prioritized issue.

(6) make it a routine (kata)

When the customer experiences a product or a service, he/she evaluates such experience. Most of the time, this evaluation does not formally reach the product maker or service provider for many reasons. However, this evaluation is often felt by the provider through returns, repeat business or new business through word of mouth.

When the customer is dissatisfied,  it is usually due to a problem. For minor problems, most people don’t complain about the service or return products. In some instances, it is just not worth their time to do that. But in most cases, they do something else if they can.

For the provider, it is a lost opportunity that is not measured immediately. A customer suddenly cancels subscription or does not plan on renewal the next time around. Or may be one mentions such a problem to friends who are considering the product or service. Some put their lack of satisfaction on social media outlets making ripple effects. In all cases, it is a customer issue that was not accounted for but will likely have  impact on the bottom line.

In summary, cost of poor quality may be extended to the lost opportunity and customer good will using the Taguchi loss function. This can be estimated by taking a sample of most recent complaints then determining the projected overall cost.  In general, as the issue (problem) with the product or service is experienced by more customers, the loss (to society) becomes more severe. Ideally, our target loss is zero which can only be achieved with perfection.

 Number of complaints

As discussed in previous posts, costs of quality are typically divided into two types:

• Costs of conformance: costs incurred to ensure that the product or service we deliver are good to go. Under this type, we have prevention as well as appraisal costs
• Costs of nonconformance: costs that result from doing something wrong. If what we make or deliver is experienced by the customer, it triggers all kinds of others costs (complaints, returns, warranty, liability, etc.)

The objective with regard to costs of quality is to invest wisely in the first type (particularly in the prevention side of activities) to minimize the non-conformance costs (particularly those generated from customers’ experience).

Do you notice a difference between activities of the first type and the second type? The first are planned (we know what they are going in) and the second are just results (unpleasant surprise!). The idea is to plan activities related to the first type (costs of conformance) so we minimize the unpleasant surprises. This applies to all types of organizations; profit and nonprofit; manufacturing and service; project-based as well as non-project-based.

Please click on the following link to see the relationship between types of errors to costs of quality: http://www.shraimqps.com/Resources/Types_of_Errors.pdf

The question is, how can all possible quality costs be accounted for in an organization? How can they be tracked? and most importantly, how can they be optimized?

Everyone knows that becoming Lean is a gradual ongoing process. Some gains, particularly those involving value stream maps, may have a significant impact on reducing lead time and associated costs. However, other gains, such as applying the 5-S system, contribute to the overall success but in smaller increments.

Gradual ongoing gains may also be realized from applying Lean concepts in quality management systems (QMS). From experience, many organizations have implementation problems and are heavy on documentation for reasons such as:

• The belief that all tasks require work instructions or procedures
• One person owns the QMS. As a result he or she is free to introduce additional items (procedures, forms, frequency of events) without real evaluation of the impact on leanness
• The QMS has redundant and/or more-frequent-than-needed tasks. This includes the circulation for signature on an updated document or over-documenting a simple step
• Copies of documents where they are NOT needed
• Change of the QMS guard which  means adding more documents. Usually, it is easier to add than eliminate documents thinking that all existing documents are needed (or they would not be there in the first place!!)
• Just in case mentality: thinking that having more would likely impress the external auditor

How do these examples affect leanness?

 I am sure that there are many examples and questions about this issue.  A Lean QMS group on LinkedIn was started to share ideas and experiences. Please join as it is open for all!

In order to provide the best value to the customer, quality (of product and service) as experienced by the customer must be managed. By “managed”, I mean planned for, controlled, and improved. Many companies engaged in applying lean concepts focus on internal operations with little attention to quality. Or quality might be addressed one issue at a time, as needed. For example, if you’ve been applying lean concepts (e.g. value stream maps) but still get many customer complaints / high external failure costs, this might be an indication.

The fact of the matter is that applying lean concepts should not be in conflict with providing high quality that the customer wants. The objectives of a lean system are to improve quality, eliminate waste, reduce lead time, and reduce total costs. In his book “Lean Thinking”, leading expert Jim Womack outlines steps for applying lean starting with identifying value. Value is specified by the customer and created by you (the producer).

If the customer specifies value, why not study what they want? What types of complaints have we encountered in the past? Can we summarize such complaints on a Pareto chart? What complaints are repeated? Do we have survey results? Any informal data from sales or field service? Answering such questions upfront will help us determine value as perceived by the customer. Once that value is determined, it can then be identified and controlled on the value stream.

In previous posts, I discussed the different costs of quality (CoQ). To summarize, prevention and appraisal costs are those related to conformance of the product or service. On the other hand, internal and external failure costs result form experiencing non-conformance, where “external” means that this experience is told by the customer.  At the ASQ-Columbus Spring Conference held at Columbus State on April 14, someone asked me if the concept of “Quality Costs” applies to sectors outside manufacturing. To prove that it does, many people from different service industries such as healthcare, education, finance, government, and information technology, among others, shared their examples during the presentation. If you would like to view / download the presentation, please go to our website.

Another question was related to the reason that while analyzing quality in terms of costs seems to be an eye-opener, why isn’t the concept used more often? One of the most challenging implementation issues for a Quality Costs program is separating such costs from other costs of doing business. Traditional accounting systems are not designed with such concept in mind. Therefore, your options are to either:

• Change the cost structure of the accounting system (must get the accounting department on board!)
• Build a separate system for capturing CoQ

It may not be simple to do either but it is well-worth the efforts.

In many cases, we know exactly what we want to work on. We have a chronic problem that generates scrap, or we may have many customers complaints resulting in returns or recalls. In such cases, we get our team of Lean Six Sigma experts to start working…

But what if we don’t have one specific BIG problem? Should we relax and forget about it? Not really! A report on costs of quality (CoQ), especially those concerning non-conformance, will be worth our efforts.   

It is estimated that between 20% to 40%  of sales are quality-related costs. One third of CoQ is related to conformance (Prevention and Appraisal). The rest, or 67%, is related to non-conformance (failure). Failure costs are divided into two types: (1) Internal Failure: Failure cost incurred before release of the product to the customer or providing the service, and (2) External Failure: Any quality-related cost incurred after the product gets to the customer. Examples of internal failure include scrap, rework, re-testing, etc. As for external failure, warranty charges, returns, recalls, remedial upgrade of software are some of many examples.

There is a lot that can be done if we are able to separate our failure costs from the overall costs of goods sold, don’t you think?

As I proposed in the first post, company X is asking you for help to improve, but where do you start?

Let’s ask this question… In terms of improvement, what does company X need?
Could it be improving customer satisfaction - for example, quality, on-time delivery ?
May be it has something to do with cost reduction?
May be the customer wants lower prices?

Typical solutions might include:
Customer dissatisfaction: give more coupons / deals
Profit margins not there: lay-off employees
Competition / Customer wants lower prices: Use cheaper materials / less qualified workforce

This rush into taking action for a “quick fix” may backfire. Giving discount and coupons to quiet customers about quality may temporarily satisfy the customer but would likely reduce the profit margin. Cutting staff without studying long term effects would also affect quality and customer satisfaction.

The first step for any improvement initiatives should always be evaluating the status quo using meaningful measures. When we do this we should keep in mind the costs of nonconformance and modes of waste. Costs of nonconformance are related to costs incurred as a result of customer’s negative reaction (bad experience) with the company’s product or service. They can also be internally generated for various reasons but related to inadequate processes.

Can you think of examples?